FEDERAL COURT OF AUSTRALIA
Avant Insurance Limited v Darshn [2021] FCA 1129
Appeal from: Darshn v Avant Insurance Limited [2021] FCA 232
File number: NSD 909 of 2021 Judgment of: YATES J Date of judgment: 16 September 2021 Catchwords: PRACTICE AND PROCEDURE – appeal – interlocutory application for stay pursuant to s 29 of the Federal Court Australia Act 1976 (Cth) of orders made in the primary proceeding for the payment of money – where the primary judge found the appellant liable to indemnify the first respondent under a policy of insurance – where the primary judge found the appellant breached its duty to the first respondent of utmost good faith – where the appellant ordered to pay sums to the first respondent on account of Legal Defence Costs incurred in other proceedings and on account of costs in the primary proceeding – where the appellant at risk of recovering sums paid if appeal succeeds Legislation: Federal Court of Australia Act 1976 (Cth) s 29
Insurance Contracts Act 1984 (Cth) s 40(3)
Federal Court Rules 2011 (Cth) r 36.08
Cases cited: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Bryant v Commonwealth Bank of Australia [1996] HCA 3; 134 ALR 460
Federal Commissioner of Taxation v The Myer Emporium Limited (No 1) [1986] HCA 13; 160 CLR 220
Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66
Nichol v Discovery Africa Limited [2016] FCA 254
Steggles Limited v Yarrabee Chicken Company Pty Ltd (No 2) [2011] FCA 1097
Stirling Harbour Services Pty Ltd v Bunbury Port Authority (No 2) [2000] FCA 87
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 31 Date of hearing: 15 September 2021 Counsel for Appellant: Mr M McCulloch SC
Ms T BerberianSolicitor for Appellant: Carter Newell Lawyers Counsel for First Respondent: Mr G Donnellan Solicitor for First Respondent: William Roberts Lawyers Solicitor for Second Respondent: Gilchrist Connell Lawyers ORDERS
NSD 909 of 2021 BETWEEN: AVANT INSURANCE LIMITED ACN 003 707 471
Appellant
AND: DR SRI BALAKRISHNAN DARSHN
First Respondent
MEDICAL INSURANCE AUSTRALIA PTY LIMITED
Second Respondent
ORDER MADE BY:
YATES J
DATE OF ORDER:
16 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.The relief claimed in prayer 2 of the interlocutory application dated 3 September 2021 be refused.
2.The appellant pay the first respondent’s costs of and incidental to the hearing of its application for the relief referred to in Order 1.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
YATES J:
INTRODUCTION
In the proceeding below, the following declaration and orders were made on 23 August 2021:
THE COURT DECLARES THAT:
Upon the proper construction of the applicant’s 2018-2019 policy with the first respondent described in paragraph…
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- Case
- [2021] FCA 1129
- Decision Date
CaseChat Overview and Summary
The legal issues the Court had to decide were whether the applicant had a serious question to be tried on appeal and whether the applicant had demonstrated that the balance of convenience lay in favour of staying the orders. The Court considered the test for a stay of payment under section 29 of the Federal Court of Australia Act 1976, which required the applicant to demonstrate that the appeal had a serious question to be tried and that the balance of convenience lay in favour of staying the orders. The Court noted that the primary judge's reasons for judgment were carefully prepared and comprehensive, and that the appeal was not manifestly or obviously erroneous. The Court also considered the financial risks that denying the stay would impose on Dr Darshn, who had already incurred costs in achieving and defending his victory.
The Court found that Avant had not demonstrated that the balance of convenience lay in favour of staying the orders. The Court held that the whole point of Dr Darshn holding insurance with Avant was to protect him from the financial burden of claims made against him in his professional capacity as a surgeon, including his need to meet the cost of defending himself in legal proceedings brought on those claims. The Court held that Avant's conduct in denying liability under the Avant policy had been found wanting by the primary judge's finding that Avant breached its duty of utmost good faith in rejecting Dr Darshn's claim for indemnity. The Court held that to deny the stay would place Dr Darshn, financially, back to where he started in relation to his claim to be indemnified in respect of claims made in the TCI proceeding. The Court held that the imposition of these added and further burdens had exacerbated, and would exacerbate, his current financial position.
The Court ordered that the relief claimed in prayer 2 of the interlocutory application be refused and that the appellant pay the first respondent's costs of and incidental to the hearing of its application for the relief referred to in Order 1. The Court's orders were in line with the Federal Court Rules 2011, which provide for the entry of orders in such cases.
Orders
Orders of the court
1. The relief claimed in prayer 2 of the interlocutory application dated 3 September 2021 be refused.
2. The appellant pay the first respondent’s costs of and incidental to the hearing of its application for the relief referred to in Order 1.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
I accept that the test stated by Heerey J in Henderson sets a higher bar than the test stated by McKerracher J in Nichol in this respect. However, in the normal run of cases, I doubt that, when it comes to exercising the discretion in a practical way, much will turn on the difference.CONSIDERATION Obviously enough, the whole point of Dr Darshn holding insurance with Avant was to protect him from the financial burden of claims made against him in his professional capacity as a surgeon, including his need to meet the cost of defending himself in legal proceedings brought on those claims. The fact that the proceeding below was expedited recognised that the likely financial burden on Dr Darshn in defending the claims made against him in the TCI proceeding would be considerable and that, if Avant was bound to indemnify him under the Avant policy, Dr Darshn should not be exposed to that financial burden or the consequences of meeting his defence costs out of his own pocket, for any longer than is necessary. The contest about whether Avant is liable to indemnify Dr Darshn under the Avant policy in respect of claims made in the TCI proceeding has been fought. Dr Darshn has won on that question; Avant has lost. What is more, Avant’s conduct in denying liability under the Avant policy has been found wanting by the primary judge’s finding that Avant breached its duty of utmost good faith in rejecting Dr Darshn’s claim for indemnity. Of course, Avant is entitled to exercise its right of appeal. However, due recognition must be given to the fact that it is appealing from a judgment and orders which find support in what are (if I may say so) obviously carefully prepared and comprehensive reasons. I do not intend by that observation to express any particular view about Avant’s prospects of success in its appeal. What I do note, however, is that this is not a case where the appellant has pointed to some manifest or obvious error in the judgment appealed from that indicates, without the need for an overly-detailed analysis, that the appeal has greater prospects of success than simply being arguable. In these circumstances, I do not think that Avant’s exercise of its right of appeal should visit upon Dr Darshn the financial risks of denying him the present fruits of his victory. To do so would place him, financially, back to where he started in relation to his claim to be indemnified in relation to the TCI proceeding. He has the added burden of costs incurred in achieving his victory and, of course, now has the further burden of costs in defending that victory. The imposition of these added and further burdens has exacerbated, and will exacerbate, his current financial position. In that regard, he is in a worse financial position than when he started—and yet he has a judgment which says that Avant is legally obliged to indemnify him in respect of claims made in the TCI proceeding and that, in rejecting his claim for indemnity, it breached its duty of utmost good faith.